President Obama's order this week to cut $100 million in administrative costs from federal programs over the next 90 days sends an important message. As the President acknowledged himself, the $100 million is more a tone-setter than a meaningful sum in a federal budget of over $3 trillion. Instead, his words put front and center the longer-term goal of eliminating waste to help reduce the deficit and pay for health care, education, and other programs critical to rebuilding our economy.
- Eliminating large overpayments to the private insurers that serve some Medicare beneficiaries through the Medicare Advantage program. Cutting these costs, projected at more that $157 billion over the coming decade, would help finance health care reform.
- Curtailing the role played by private lenders in administering student loans. A Congressional Budget Office analysis found that $94 billion could be saved over 10 years if the government directly provided student loans. President Obama has proposed using the savings to increase Pell grants to low-income students.
- Cutting back funding for obsolete or unworkable weapons systems. The Center for American Progress has found that the United States could save $60 billion through such measures as scaling back funding for Cold War-era weapons and ballistic missile defense systems that are not now technically feasible. In the budget proposed by Defense Secretary Robert Gates, the Obama Administration has already begun to take steps in that direction.
Tax loopholes and cuts can be another form of government waste when they give well-off taxpayers a free ride at the expense of the rest of us. A Senate budget proposal to further slash the estate tax, which currently affects no couples with estates worth less than $7 million, would deprive the government of nearly $100 billion over 10 years - revenue that would help defray the cost of much-needed programs and services.
Big oil has also traditionally been a beneficiary of problematic tax policies. An analysis by Friends of the Earth (pdf) found that under Bush Administration policies oil companies stood to gain $33 billion in savings through a variety of tax loopholes over the next five years.
More problem areas could be identified with a better government system for measuring program effectiveness. The Program Assessment Rating Tool (PART) put in place by the Bush Administration has been criticized as ineffective. During his confirmation hearing, Peter Orszag, the new director of the Office of Management and Budget, said PART focused "too much on process and not enough on outcomes." As one example, he noted that PART evaluates the number of audits the Internal Revenue Service conducts each year, rather than how well the IRS achieves compliance rates. "I'd like to see a system that tells IRS to hit a certain compliance rate in the tax code," Orszag said. "Don't just tell me your audit rate."
The President's budget makes clear choices among alternative uses of scarce resources. He argues that providing health care reform, improving education and creating green jobs benefit the economy more than padded contracts for weapons, private lenders or health insurers. The President is right. He's also right to want to improve administrative efficiency and eliminate enormous tax breaks that do not spur economic growth.
Building a sustainable recovery requires us to use every federal dollar wisely. We must try new approaches, because we know it is possible (and necessary!) to improve the way we deliver health care, educate our children and provide economic security for families. Decisions on whether to continue or expand existing programs - or to scrap them in favor of something new - should be made by taking a close look at whether they are achieving what we need.
Predictably, special interest groups are already lining up in opposition to cuts in everything from student loan administration to subsidy payments for big farmers. If we're serious about doing all we can to support programs that work, we need to make sure that those voices do not drown out the rational calls for an effective and efficient government that will boost our economy and help all Americans.
Deborah Weinstein is executive director of the Coalition on Human Needs, a Washington, D.C.-based alliance of national organizations working together to promote public policies that address the needs of low-income and other vulnerable populations.